This is the free weekly update that is posted first to the OptionProfessor.com site each week. The Substack paid updates provide more specific detail.
Happy July 4th Everybody!…..What a difference a year makes as we celebrate Independence Day! We have been following this trend wit Value Stocks an more recently a return to the Tech-Innovator names that got crushed in Q1 only to rise from the ashes in Q2. Historically; the month of July has not been a stellar month and after the giant gains of Q1 & Q2; we anticipate volatility to pick up. Let’s see….short term charts have RSI’s in the 80’s…we’re OVER 1,000 pts above the S&P 500 LT 3yr moving average…the VIX has a 14 handle….IPO’s are at a record pace….junk bonds are turning into investment grade…and after this quarter earning comps get more difficult as input costs and wages may outpace revenue growth. The jobs report showed 850K improvement with more to follow….wages up 3.6% (huge)….and participation flat. Are we at peak inflation, growth and Fed accommodation? Maybe…but consumer spending is up 19% over 2019 according to B of A and what some call pent up demand (revenge spending for being bottled up for 12 months) is roaring. Corporations are full of cash to use for buybacks, dividends (return of capital) and what some see as a 25% Jump in various Capital Expenditures as they are free to take action after a year of restraints….that would only put them back on trend. Recovery is not a trained seal & generally is not linear…..not all news is rosy on inflation and trade (core PCE up the most since 2008 & trade deficit 2nd highest ever). The yield curve steepened & next week PMI’s In our NEWSLETTER: we will be covering replacement trades, trimming, collars, married puts ect. to protect portfolios and also what sectors or stocks look promising in the 2nd half (i.e AAPL V AMZN +2%-6% catch up/Energy stocks divergence with energy prices-catch up-PLUS tangible assets that lagged) SUBSCRIBE option professor.com/subscribe
Records records records…will it ever end….well July is the month that is 4 months after interest rates peaked in March so it’s as good a month as ever to see a pull back. With no price evidence to support that we wait to get such evidence but will not dispute it when it comes…..and at some point it always does. We have ridden the tech & value story as well as consumer discretionary health care and communication runs as well. We told reader when NVDA was 570 that if they had a AAPL type run up pre split….our Fib calculation had us going to 834 (it hit at 820 today!)…we also thought using a short term moving average on a 6 month chart to ride it was reasonable which also worked out. We see a lot of opportunity in the 2nd half of 2021 JOIN US at optionprofessor.com/subscribe and start getting our information.
Rates refuse to move higher meaningfully despite consumer spending, higher inflation, and huge deficits. We are awash in liquidity so there is plenty of money looking for a home. We have been steadfast that until we take out 1.75% 10 yr and 2.55% 30 yr (March highs) duration, high yield and munis made a lot of sense and our opinion remains. In fact; debt was on sale in Q1 and has not looked back since that sell off. Even emerging market debt that got whacked in Q1 has bounced back. We review INCOME ideas weekly Go to optionprofessor.com/subscribe and get informed.
US Dollar & International Markets
The Dollar Index (DXY) turned up after failing to take out 89 in June and our moving averages are rising at 92-91 and 90.75 so while we could see a pull back we are not jumping on the Dollar fade bandwagon until we take out 90 on volume. Europe is having trouble with the Delta variant (a worldwide risk) and Asia-Pacific are behind the 8 ball on vaccinations making the Euro & Yen dodgy at this time. The commodity currencies (Aus$ & Can$) may get renewed life in the weeks ahead if the AUS gets back above 76-77 and the Can holds 79.50. It’s been USA all the way in the equity markets as a pause has hit European stocks, China stocks are back in the tank, and Emerging markets Asia Pacific have been nothing to write home about…we think changes are in the wind. SUBSCRIBE at optionprofessor.com/subscribe
Crude Oil Natural Gas
OPEC couldn’t get a consensus so it looks like tight supplies may be here to stay thru summer. Crude is at 75 and staying above 73 & 70 is a must for the trend to continue…..the big story here is price divergence between the oil prices and the share prices…we share our opinion on how that gets resolved with subscribers. Natural Gas has benifited from the heat wave but conservation pleas have been heard and enacted so while prices hit 3.80 (we got very bullish months ago at 2.50)…it could have been worse. Our favorite LNG still looks good (we got bullish at 70 & it closed 87+) To find out what we think about the energy markets go to optionprofessor.com/subscribe and get onboard!
Gold Silver Platinum Copper Crypto
These markets may very well be sleeping giants for the 2nd half of 2021 as INFLATION may persist and the Fed cannot meet the rise in inflation as the DEBT bubble would burst….jawboning works for awhile them morphs into the boy who cried wolf. The support levels are right under us at the March & June lows and like crypto if you don’t want to buy discounted prices then you may find yourself buying higher prices by year end. To wait for momentum is an option to consider so if we take out prior weekly/monthly highs; the view may be clearer at that time. Industrial metals still seem to have a bid as cap ex spending infrastructure and general construction seems to still be outpacing supplies. We get into specifics on all these markets in the newsletter…educate yourself…SUBSCRIBE optionprofessor.com/subscribe
Soybeans Sugar Coffee
All three markets got hit recently and have bounced back keeping the commodity super cycle bulls feeling better. Getting and staying above 13-14 Beans, getting and staying above 16 Sugar and Above 140-150 Coffee could keep the longer term moving averages from turning down so stay tuned as if the softs metals and oil have big 2nd halves one has to wonder what that does to fiat currencies and assets Stay Informed go to optionprofessor.com/subscribe!
Remember There is risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your own suitability. Past performance is not indicative of future results. Opinions & information provided is for informational purposes ONLY and it is NOT Advice.